The new Morningstar Analyst Rating for funds is a qualitative, forward-looking measure based on analyst research, whereas the Morningstar Rating for funds, or the ‘star rating,’ is a purely quantitative that rates historical performance based on risk- and cost-adjusted returns without any input from Morningstar’s analysts.
The new system will also take into account more subjective factors such as how particular fund companies treat their shareholders, along the lines of Morningstar’s existing stewardship grades.
According to the company, its analysts will arrive at a rating through an evaluation of five key pillars: people, process, parent, performance, and price.
Morningstar said the new analyst ratings will not replace the star ratings, and the existing star rating methodology will not change.
The new Morningstar Analyst Rating for funds will be assigned as one of five ratings — AAA, AA, A, Neutral, or Negative.
The company plans to launch the new ratings and research reports in the US, Canada, Europe, Asia.
Morningstar plans to launch between 150 and 200 analyst ratings and reports for US funds in the fourth quarter.
